The US wants India to remove or substantially prune import tariffs on scores of ICT products — including high-end mobile phones and smart watches — apart from rolling back the price curbs on medical equipment like stents. The demands that India thinks are difficult to accommodate, along with a host of other vexed issues, have cast a shadow over a trade package that both the countries have been negotiating on for months now without much success, sources told FE. The US is seeking to use its so-called generalised system of preference (GSP) regime —under which it allows imports of select products from a host of poor or developing countries, including India, at concessional duties — as a leverage to ask New Delhi to heed its demands, said the sources.

The items on which the US wants India to cut/scarp duties include high-end mobile phones costing over Rs 10,000, mobile phone parts, smart watches, telecom network equipment such as switches and routing equipment, radio receivers and certain print circuit assemblies. Currently, these items attract up to 20% customs duties. New Delhi feels any move to cut duties would run contrary to its Make-in-India initiatives, raise non-essential imports (which it wants to curb) and cause customs revenue losses. Interestingly, given the fact that the US accounts for only 2% of India’s annual imports of the seven ICT products on which it is seeking duty waiver/cut, its demand has baffled officials here.

This is because since both the US and India are signatories to the World Trade Organization, in the absence of a formal trade agreement between them, any duty cut effected by New Delhi has also to be granted to others, including China and South Korea that accounted for a bulk of the country’s $20.5-billion imports of these seven ICT products in FY18. India raked in over $3 billion in customs revenue from these items last fiscal. The US’ exports of these items to India in FY18 were only $0.4 billion. As such, the US is not a major exporter of these products globally, as the ICT export market is dominated by China, Korea and Japan.

The US also wants India’s price curbs on bioresorbable stents to go. India is a large market for stent makers and it imported medical instruments, including stents, worth around $1.6 billion from the US in the last fiscal, up 10% from a year earlier. The two sides have also not held the annual trade policy forum meeting so far this year (it is usually convened around October), in a sign that bilateral relations are far from perfect. For its part, in the hope for a “mutually-acceptable” trade package, India has already deferred its plan for a fourth time to retaliate against the extra US duty on its steel and aluminium (The fresh deadline for tit-for-tat action is January 31). This is despite the fact that the Trump administration has recently removed as many as 50 Indian goods from the list of items supplies of which are eligible for concessional tariff under the GSP regime.

As part of the trade package, while India wants an exemption from the additional duty on its steel and aluminium, the US is also seeking to use GSP benefits it offers to India and some others to extract greater market access from New Delhi and reduce a trade imbalance. For India, greater access to the American market in food, farm, engineering goods, auto and auto parts segments hold promise in the long term (over five years). The US sees good prospects for its companies in Indian civil aviation, oil and gas, education service and agriculture segments.